SRS’ Patrick Luther Among Brokers Offering Insight on Investor Preferences in Current Economic Climate
Multiple factors are weighing on deal and transaction activity in 2023’s commercial real estate markets; rising interest rates, cap rate changes, a bid-ask gap and changing work strategies, among other factors, are contributing to the general slowdown in investment activity, particularly in the office sector. The challenges are unlikely to go away any time soon.
“The public markets are telegraphing that there’s a significant disconnect between market expectations and pricing,” said Mark Grinis, leader of the real estate, hospitality and construction practice at Ernst & Young. This difference in opinion of the value of a transaction may be more visible in the public markets than in the private markets, but it remains one of the most prominent challenges, Grinis added.
Contributing to the mismatch is that investors prefer to sell their assets and create liquidity at 2022 cap rates, noted Patrick Luther, co-founder & managing principal of the net lease unit at SRS Real Estate Partners. “If an owner has fixed debt with an expiring term after 2025, those owners are generally cash-flowing, even if they overpaid for what they bought,” Luther said.
For the full story, go to Commercial Property Executive.